Framework assumptions

Economic activity (Table A.1) and population (Table A.2) are the two fundamental drivers of demand for energy services in ETP scenarios. These are kept constant across all scenarios as a means of providing a starting point for the analysis, and facilitating the interpretation of the results. Under the ETP assumptions, global GDP will more than triple between 2021 and 2050; uncertainty around GDP growth across the scenarios is significant, however. The climate change rate in the 6DS, and even in the 4°C Scenario (4DS), is likely to have profound negative impacts on the potential for economic growth. These impacts are not captured by ETP analysis. Moreover, the structure of the economy is likely to have non-marginal differences across scenarios, suggesting that GDP growth is unlikely to be identical even without considering secondary climate impacts. The redistribution of financial, human and physical capital will affect the growth potential both globally and on a regional scale. Assumed GDP projections for ETP 2015 are unchanged to ETP 2014. An update of the GDP projections is planned for the ETP 2016 edition, taking into account also revised power purchasing parities data for 2011, released by the World Bank’s International Comparison Program in 2014.

Energy prices, including those of fossil fuels, are a central variable in the ETP analysis (Table A.3). The continuous increase in global energy demand is translated into higher prices of energy and fuels. Unless current demand trends are broken, rising prices are a likely consequence. However, the technologies and policies to reduce CO2 emissions in the ETP 2014 scenarios will have a considerable impact on energy demand, particularly for fossil fuels. Lower demand for oil in the 4DS and the 2DS means there is less need to produce oil from costly fields higher up the supply curve, particularly in non-members of the Organization of the Petroleum Exporting Countries (OPEC). As a result, oil prices in the 4DS and 2DS are lower than in the 6DS. In the 2DS, oil prices even fall after 2030.

Prices for natural gas will also be affected, directly through downward pressure on demand, and indirectly through the link to oil prices that often exists in long-term gas supply contracts.1 Finally, coal prices are also substantially lower owing to the large shift away from coal in the 2DS.

Table A.3 Fossil fuel prices by scenario

2012

2020

2025

2030

2035

2040

2045

2050

IEA crude oil import price (2013 USD/bbl)

2DS

106

105

104

102

101

100

99

98

4DS

106

112

118

123

128

132

135

137

6DS

106

116

128

139

147

155

161

167

OECD steam coal import price (2013 USD/t)

2DS

86

88

83

78

78

77

77

76

4DS

86

101

105

108

110

112

114

116

6DS

86

107

112

117

121

124

128

131

Gas (2013 USD/MBtu)

US import price

2DS

3.7

5.1

5.5

5.9

6.0

6.1

6.0

6.0

4DS

3.7

5.5

6.1

6.6

7.4

8.2

8.4

8.5

6DS

3.7

5.5

6.2

6.8

7.7

8.5

8.9

9.1

Europe import price

2DS

10.6

10.5

10.3

10.0

9.6

9.2

9.1

9.0

4DS

10.6

11.1

11.6

12.1

12.4

12.7

13.0

13.2

6DS

10.6

11.5

12.4

13.2

13.6

14.0

14.6

15.0

Japan import price

2DS

16.2

13.6

13.1

12.6

12.3

12.0

11.9

11.8

4DS

16.2

14.4

14.5

14.6

15.0

15.3

15.7

15.9

6DS

16.2

15.0

15.7

16.3

16.9

17.5

18.2

18.8

Notes: bbl = barrel; t = tonne; MBtu = million British thermal units.

The global marginal abatement costs for CO2 to reach the reduction targets of the 4DS and 2DS are shown in Table A.4. These values represent the costs associated with the abatement measures to mitigate the last tonne of CO2 emissions to reach the annual emissions target in a specific year. The global marginal abatement costs can be regarded as a benchmark CO2 price allowing the comparison of the cost-effectiveness of mitigating options across technologies, sectors and regions. For the 2DS, with costs of up to USD 170 per tonne of CO2 (t/CO2) in 2050, it is more cost-effective to implement all mitigation measures up to that cost level rather than emitting the CO2. In the 4DS, the less ambitious CO2 reduction target results in significantly lower marginal abatement costs of up to USD 60/tCO2. The costs shown for the 6DS reflect only the carbon price in the EU Emissions Trading Scheme (ETS) for electricity generation, industry and international aviation, which has been assumed to be continued after 2020.

Table A.4 Global marginal abatement costs by scenario

(USD/tCO2)

2020

2030

2040

2050

2DS

30-50

80-100

120-140

140-170

4DS

10-30

20-40

30-50

40-60

6DS

20

30

40

50

Note: 6DS only assumes carbon pricing in the EU for the sectors currently included in the ETS (electricity generation, industry and aviation).

1 This link is assumed to become weaker over time in the ETP analysis, as the price indexation business model is gradually phased out in international markets.